Fed Could Trim Bond Buys To $65B Next Week – WSJ

By Michael Aneiro

Wall Street Journal Fed-watcher Jon Hilsenrath is out with a story today suggesting the Federal Reserve is prepared to take a second consecutive step in winding down its bond-buying stimulus program at its next policy committee meeting next week, which will be the last such meeting of Ben Bernanke’s tenure as Fed chairman. Hilsenrath cites interviews with officials, as well as their public comments, in saying the Fed could cut its monthly bond buys to $65 billion, after trimming them to $75 billion at its December policy meeting from the $85 billion rate that had been in effect since the program’s inception. From the story:

The Fed has been buying Treasurys and mortgage bonds in an effort to drive down long-term interest rates and spur spending…

Bond buying is one of two prongs in the Fed’s strategy to boost the economy. The other is low interest rates, and Fed officials are once again debating how best to describe their plans for when they eventually begin raising short-term rates.

In December, the Fed said rates would remain near zero “well past” the time when the unemployment rate falls to 6.5%. The Fed is in no hurry to raise interest rates. But because officials have tied their plans to movements in the jobless rate, they see a need to better explain their plans as the jobless rate drops.

At last check, the 10-year Treasury yield is holding steady at 2.84%, mostly unchanged from where it was trading Friday, per Tradeweb data.